Overview
This case presents an issue of first impression in this circuit: whether a third-party debt collector’s efforts to collect a dishonored check are governed by the Fair Debt Collection Practices Act (“FDCPA” or “the Act”), 15 U.S.C. §§ 1692-1692o. The district court ruled that the FDCPA does not apply to efforts to collect a dishonored check, because a dishonored check is not a “debt” under the FDCPA.
The only federal court of appeals that has considered this question is the Seventh Circuit. In a well-reasoned and persuasive opinion, that court recently held that a dishonored check is a “debt” under the FDCPA. Bass v. Stolper, Koritzinsky, Brewster & Neider, S.C.,
Sharolyn Charles (“Plaintiff’) brought suit against Check Rite Ltd., Alvin R. Lundgren, and Lundgren & Associates (collectively, “Dеfendants”), alleging that Defendants’ actions in attempting to collect a dishonored cheek violated the FDCPA. Charles wrote a check in the amount оf $17.93 to a Poncho’s Restaurant as payment for a meal on July 4, 1996. The check was dishonored for insufficient funds. Poncho’s forwarded the returned check to Check Rite for collection. On July 19, Check Rite sent a letter to Charles, stating that “[t]his is an attempt to collect a debt” and requesting total payment of $42.93-the amount of the check plus a service charge of $25.00. On August 7, Check Rite sent a second letter, requesting payment of $42.93 and advising Charles that failure to pay thе total amount due might result in additional liability for damages and attorneys’ fees, estimated at $242.93.
Check Rite subsequently referred the matter to the law firm of Lundgren & Assoсiates for collection. On September 8, Lundgren sent a letter to Charles offering to settle within ten days for a total amount of $127.93-the amount of the check plus a settlement amount of $110.00. Lundgren farther advised that they had made no decision to file suit, that they could later decide to do so, and that Charles’s pоtential liability was $317.93. Charles immediately sent to Lundgren a money order in the amount of $17.93. On September 13, Lundgren sent a second letter, repeating the settlement оffer made in the September 8 letter. Lundgren then returned Charles’ payment, on September 14, declining to accept it as payment in full and repeating the settlement offer. On September 19, Lundgren sent a fourth letter to Charles, repeating the settlement offer.
On October 15, Charles filed a suit against Defendants, seеking certification of her suit as a class action and alleging violations of the FDCPA, 15 U.S.C. §§ 1692e, 1692f, 1692g. The alleged violations included making false representations, sеeking to collect more money than required by state law to discharge the debt, and threatening litigation without intending to pursue it. Defendants moved to dismiss for failurе to state a claim, pursuant to Federal Rule of Civil Procedure 12(b)(6), on the ground that an attempt to collect a dishonored check is not an attempt to collect a “debt” governed by the FDCPA. The district court granted the Defendants’ motion, holding that the FDCPA did not apply to Defendants’ actions. The district cоurt concluded that the FDCPA applies only to debts arising out of an offer or extension of credit and that dishonored cheeks therefore are not “dеbts” within the statute’s meaning. Plaintiff appeals.
Discussion
In a factually similar situation, our colleagues on the Seventh Circuit recently confronted the same question of whether a dishonored check is an FDCPA “debt.” See Bass,
In Bass, the Seventh Circuit ably analyzed the scope of the FDCPA and responded to the same arguments presentеd by the Defendants here. To determine whether a dishonored check constitutes an FDCPA debt, the Seventh Circuit began with the text of the FDCPA itself. The FDCPA defines “debt” as:
any obligation or alleged obligation of a consumer to pay money arising out of a transaction in which the money, property, insurance, or services which are the subject of the transaction are primarily for personal, family, or household purposes, whether or not such obligation has been reduced to judgment.
15 U.S.C. § 1692a(5) (emphasis added). Noting that “we see no language in the Act’s definition of ‘debt’ (or any other section of
Although resort to extrinsic sources was unnecessary in view of the clear language of the Act, the Seventh Circuit reviewed the legislative history, сoncluding that it “serves to reinforce a finding that non-credit transactions are included in the Act’s purview.” Id. at 1327. Noting that earlier versions of the Act included a credit extension requirement and that the applicability of the Act to dishonored checks was acknowledged during the House and Senate hearings, the Sеventh Circuit aptly concluded: “In short, Congress was aware of discord on whether ‘debt’ should be defined restrictively to include only credit transactions, but rejeсted this restriction in the text it adopted.” Id. Finally, the court pointed to “an unequivocal statement of the drafters’ intent on this issue: ‘[T]he committee intends that the tеrm “debt” include consumer obligations paid by check or other non-credit consumer obligations.’ ” Id. (quoting H.R.Rep. No. 95-131, 95th Cong., 1st Sess. 4 (1977)).
The Seventh Circuit also rejected the appellants’ reliance on the Act’s codification as an amendment to the Consumer Credit Protection Act (“CCPA”), 15 U.S.C. § 1601 et seq. Noting that the Act’s plaсement in the CCPA is “at best a weak tool in the search for Congressional intent,” the court found the connection “unpersuasive in light of the continuing expansiоn of the CCPA’s protective landscape.” Id. at 1328. Finally, the Bass court rejected the suggestion that “any dishonored check should fall outside the act pursuant to a judiciаlly created fraud exception.” Id. at 1329.
We find the Seventh Circuit’s reasoning to be sound and thus hold that a dishonored check is a “debt” within the meaning of the FDCPA. Our decision in Bloom v. I.C. System, Inc.,
Because we have the benefit of the Seventh Circuit’s cogent analysis, we will not replow рlowed ground. Instead, we adopt the reasoning of the Seventh Circuit and conclude, as it did, that the FD CPA’s application is not limited to collection of debts arising out of the offer or extension of credit. A dishonored check constitutes an FDCPA “debt,” and therefore the FDCPA prohibits check collectors from using abusive practices. We reverse the district court’s dismissal of Plaintiffs complaint for failure to state a claim and remand for further proceedings.
REVERSED AND REMANDED.
Notes
. We grаnt the Defendants’ Motion to Strike the Plaintiff’s Appendix. We also grant the Motion for Leave to File an Amicus Brief submitted by the National Association of Consumer Advocates, Inc. and the Consumer Law Center of the South.